How Your Real Estate Agent Gets Paid When You Buy A House

When you determine that now is a good time to buy a single-family house, you will need to hire a real estate agent. The agent you hire will earn a commission if you buy a house, but have you ever wondered how this works? Here is a breakdown on how commissions work with real estate transactions.

Agents Get Paid at Closing

First, you should realize that your agent will not earn a dime until you close on the property you are buying. That is right. Your agent may spend weeks or months working with you to find the right home, but he or she will not get paid for this work until closing. At closing, the title company cuts a check for the agent's part of the commission from the sale. The agent gets a one-time fee for the services offered, and this payment does not arrive until the deal is set in stone.

The Commission Comes from the Seller

So, who pays the commission? The seller of the house does. The seller hires an agent to list the house, and this is the listing agent. The agent that the buyer uses is the buyer's agent. When the deal closes, the seller often pays the full commission, however much that might be. In a typical situation, the amount is 6% of the selling price. If a house sells for $250,000, the commission is $15,000. Sellers usually try to raise their prices a little to compensate for paying this fee. While the buyer does not pay the fee, the buyer might pay a slightly higher price for the house to compensate for the commission.

Agents and Agencies Split the Commissions

At closing, the agents involved in the deal split this amount. Each gets part of the commission, and the agencies they work for receive a portion, too. The way they split the commission varies, but typically each party receives half. Each agent then pays a portion of this amount to the agency they work for.

Agents only earn money when they sell houses, and they do not receive it until closing. Keep this in mind when you hire one for help finding a house to buy.

If you want to buy a house with a real estate agent, it is important to realize how your agent will earn money from helping you. If you are ready to shop, call one today to get started looking at single-family homes for sale.